NEW YORK - “Pig-butchering” scammers have likely stolen more than US$75 billion (S$101 billion) from victims around the world, far more than previously estimated, according to a new study.

Dr John Griffin, a finance professor at the University of Texas at Austin, and graduate student Kevin Mei gathered crypto addresses from more than 4,000 victims of the fraud, which has exploded in popularity since the pandemic. They tracked the flow of funds from victims to scammers largely based in South-east Asia.

Over four years, from January 2020 to February 2024, the criminal networks moved more than US$75 billion to crypto exchanges, said Dr Griffin, who has written about fraud in financial markets. Some of the total could represent proceeds from other criminal activities, he said. “These are large criminal organised networks and they’re operating largely unscathed.”

Pig butchering – a scam named after the practice of farmers fattening hogs before slaughter – often starts with what appears to be a wrong-number text message. People who respond are lured into crypto investments.

But the investments are fake and once victims send enough funds, the scammers disappear. As far-fetched as it sounds, victims routinely lose hundreds of thousands or even millions of dollars. One Kansas banker was charged in February with embezzling US$47.1 million from his bank as part of a pig-butchering scam.

The people sending the messages are often themselves victims of human trafficking from across South-east Asia. They are lured to compounds in countries, including Cambodia and Myanmar, with offers of high-paying jobs, then trapped, forced to scam, and sometimes beaten and tortured. The United Nations has estimated that more than 200,000 people are being held in scam compounds.

The study – titled How Do Crypto Flows Finance Slavery? The Economics Of Pig Butchering – was released on Feb 29. Dr Griffin and Mr Mei found that US$15 billion had come from five exchanges, including Coinbase, typically used by victims in Western countries. The study said that once the scammers collected the funds, they most often converted them into Tether, a popular stablecoin. Of the addresses touched by the criminals, 84 per cent of the transaction volume was in Tether.

“In the old days, it would be extremely difficult to move that much cash through the financial system,” Dr Griffin said. “You’d have to go through banks and follow ‘know-your-customer’ procedures. Or you’d have to put cash in bags.”

Tether chief executive officer Paolo Ardoino called the report false and misleading. “With Tether, every action is online, every action is traceable, every asset can be seized and every criminal can be caught,” he said in a statement. “We work with law enforcement to do exactly that.”

Tether has cooperated with the authorities in some cases to freeze accounts tied to fraud. But often, by the time the crime is reported, the scammers have cashed out.

Dr Griffin said the study shows Tether is “the currency of choice for criminal networks”.

Chainalysis, a blockchain analysis firm, said the study’s totals might be inflated. Just because a blockchain address receives some money from a pig-butchering scam does not mean all the money received by that address comes from fraud.

“Quantifying funds earned through pig-butchering scams is challenging, given limited reporting,” said Chainalysis spokeswoman Maddie Kennedy. Tether is one of the company’s customers.

Many of the fraud victims’ blockchain addresses were collected by Chainbrium, a Norwegian crypto investigations firm.

Chainbrium conducted its own analysis of the data and found that a large proportion of the funds flowed through a purportedly decentralised crypto exchange called Tokenlon. Scammers use the exchange to obscure the source of the funds, according to Chainbrium. Tokenlon did not respond to a request for comment.

“People in the United States... their money is going straight to South-east Asia into this underground economy,” said Chainbrium consultant Jan Santiago.

Eventually, the criminals would send the scam proceeds to centralised crypto exchanges to cash out for traditional money.

Dr Griffin said Binance is the most popular exchange, even after the company and its founder Zhao Changpeng pleaded guilty in November to criminal anti-money laundering and sanctions charges and agreed to pay US$4.3 billion to resolve a long-running investigation by prosecutors and regulators.

“Binance is the place where they can move large amounts of money out of the system,” Dr Griffin said.

Like Tether, Binance has worked with law enforcement in some cases to freeze accounts tied to fraud and return money to victims. A company spokesman said it recently worked with the authorities to seize US$112 million in a pig-butchering case. BLOOMBERG